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New 403b Plan At Last

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Hello all,


After many months of convincing my employer that we could go with a lower cost 403b plan, it was finally approved that we move to a new provider. Our consultant is recommending Wacovia, Pricipal or Prudential. . .mostly because we can also bundle our retirement Defined Benefit with those providers to leverage our total capital. Does anyone have any opinion about any of these three companies in terms of cost, service and investment portfolio? Thanks for your assistance.



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Each of those Platforms can be used to deliver a wide range of services and investment fund offerings. My experience with each is that they are most typically accompanied by an intermediary (adviser, broker, agent, consultant - whatever name you want to put on the intermediary) which means that you have know more of the details.


Intermediary driven Platforms tend, in my opinion, to be attractive for employers who want to shift the expense burden of a plan to participants. Participants pay for the plan (investments and other services) via the expenses that are placed on plan assets. It would appear to me that your organization wants the plan to carry much of its own expense burden.


This can work particularly well in situations where plan assets are large in aggregate and on a per capita basis. The general rule is that as scale declines, this arrangement can lead to excessive expense burden on participants.


As to the concept of leveraging your organization's capital - its a great idea, but it takes work. And the gains of the leveraging are delivered to the employer? the participant?


Finally, the Principal is probably offering a VA (Variable Annuity) product whereas the others are Custodial or Trust arrangements using mutual funds.


Regarding the service level, I believe the most effective way of evaluating that is to obtain specific references from each candidate with detailed identification of your service team. Are you going to be served by a team that is 3000 miles away or nearby. And do they have other proven, pleased clients near you that you can speak with? If your consultant has not already provided this level of detail in evaluating these candidates, you are not getting good value.


I'd anticipate that the costs will be similar for all. And Investment management fees dominate over hard fees, so you want to pay most of your attention to investment expense ratios.


The Investment Portfolio question is very complicated, as each is going to be effectively re-selling other investment product and trying to obtain some assets in proprietary investment instruments.


I'd take a careful look at what these offerings really deliver.


Good Luck,





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I would stay away from all 3 of those companies most likely. I have first hand knowledge of the Principal group. They do have good customer service, but as MIA-MD said they are going to have Variable Annuities wrapped in the plan and it is going to cost you an arm and leg in expenses. I assume it is the same with Wacovia and Prudential.


Can't you give a call directly to Fidelity / Vanguard to see if there companies can handle your plan. It sounds like it messes up by having the DB plan as well. However, could you get your 401k/403b attorney to see if there is way to split the plans up in some manner or merge them into a DC plan? There has to be other options.




John (aka Tampa Gator)

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Be sure to understand exactly how your "consultant" is getting paid. Is he recommending companies that are only paying him some kind of finders fee? Be careful, there are many crooked third party consultants out there. I find it interesting the types of companies he is recommending.

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